Ace the 2026 Real Estate Math Challenge – Count Your Future Riches!

Vacancies and credit losses reduce the cash actually collected, so you start with Potential Gross Income (assuming full occupancy and no bad debts) and subtract the expected losses from vacancies and uncollected rents. Doing this gives Effective Gross Income, the amount available before operating expenses. From there, you subtract Operating Expenses to get NOI, since debt service is a financing item and not part of EGI. The other options either add losses or subtract the wrong items from PGI, which doesn’t reflect the real income after vacancies and credit losses.